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Posted by
Mr. Smith
on 2009-06-26

Getting a meeting with an investor is hard these days, but it can be done. Once in a meeting, here are five strategies to make the meeting go well:

>> STICK TO THE FACTS
Sell your idea on factual information only. Avoid adjectives and superlatives whenever possible. You do not have the best, the most, or the greatest anything. Most investors see 2,500 deals per year. They need basic information to determine interest. Suspect information is a red flag, and it only takes one red flag for an investor to lose interest.

>> KEEP YOUR PITCH SHORT
You should be able to explain your company in 10 slides that take about 20 minutes to present. If you want to succeed, then videotape yourself giving the pitch. Watch the video and write down everything that you want to improve in a list. Repeat this process until you are happy with the results. At the end of your pitch, say: "does anyone have questions that I can help you with?" The shorter your pitch, the more questions that will you have, and more questions are good.

>> ANSWER EVERY QUESTION BRIEFLY
Answer every question with one or two sentences and with as few words as possible. Uncomfortable silence is a tool that you can use to elicit another question. If you do not have or know an answer, say: "I don't recall the answer to that off the top of my head, can I look it up in my files and get back to you through email." Questions are an excellent sign of interest and engagement. When an investor gets into 'question mode,' they usually have a series of 5 to 10 questions that they need answered quickly to evaluate the opportunity. You are doing well in a pitch when the investors are talking.

>> ASK FOR FEEDBACK AND TAKE NOTES
Make sure to leave a few minutes to collect feedback. Ask the investors, 'do you have any recommendations for the business?' Have a pen and paper out, and write down everything that the investors say. It's a common courtesy to take notes, and it is expected. After an investor says something, say 'thank you.' Do not get defensive. Nothing sours a relationship faster than getting into a debate.

>> BE AN EXPERT IN YOUR INDUSTRY
You should read every recent blog post and know about every key development in the primary industry and all related industries to your idea. It is very likely that an investor will have seen and researched a very similar idea within the last 45 days. It is also very likely that this investor will ask you about mundane developments or other companies in the field as a test of your knowledge and to show off their own expertise. When confronted, you say, 'Yes, I was aware of that. Thank you.' This will lead to more questions.

As a closing point, be confident and assured. A common misperception is that a deal can be done in one meeting. It usually can't. So, the goal of any meeting should be (1) to get another meeting and (2) to specify follow-up items.

Posted by
Bruce Kasanoff
on 2009-01-27

In the middle of trying to launch a start-up (The Goal Mine), the deepening downturn has pulled me back to a practice (Now Possible) that has become more timely than ever: re-positioning companies.

As I look around the entrepreneurial landscape, what surprises me is how little substantive re-positioning has occurred... yet. The world has shifted, dramatically. The rules have changed. And yet most firms are pretty much still pitching the business model they developed before last fall. 95% of the time, that's not going to work.

This new world creates its own opportunities. All is not gloom and doom, unless you fail to acknowledge how much the rules have changed. Rents are going down. Lots of talent is available. People are willing to take chances (largely because they have no choice.) But at the same time, everyone has both hands on their wallet.

One thing to keep in mind: hope is not a strategy. Hoping you'll get funding and find customers even though you did not change your positioning, well, that's not much of strategy. Basically, the entire world is taking a 50% pay cut. So what do you do differently?

As it is becoming harder to raise capital from venture capitalists, existing investors are facing situations where they need to lead new rounds in their own portfolio companies. This presents a big problem for valuations, especially if an investor only has convertible debt. Recently, I've heard a few stories about existing investors promising to lead a round, then pulling out or dramatically changing the terms. Worse, investors will sometimes string you along with a singed term sheet until you are out of cash, and then completely change the deal to take control.

Here are some tips if you think that you are going to need money in the next 18 months.

Know where insiders stand: You need to know where if your insiders will participate or lead a new financing event, and you should also ask them what their specific expectations are for your company performance. Assume that any inside round will be flat.

Pursue other options: Even if your insiders agree to lead a round, you should do your best to have an alternative financing option available. You will never get a fair price for your equity from insiders, since they are pricing, selling, and buying the equity at the same time and since they see all the warts and bruises.

Raise now, not later: Don't wait to raise money. Raising will take twice as long and will be twice as hard in this market. Try to raise enough capital to operate for more than 48 months, if you can.

When in doubt, do debt: If things are not moving fast enough and you have only three or four months worth of cash left, press your existing investors to do a convertible debt round that will give you eight to twelve months of low growth operating capital.

Insider sheet to attract outsiders: If everything else is failing, you may want to have your insiders draft a term sheet with a lot of room for new investors to participate. It's often easier to find outside investors with a "legitimate" term sheet in hand.

Posted by
sparrow
on 2008-11-20

It's an easy trap to fall into. You've labored on your powerpoint presentation, you got nice graphics into it, you followed Guy's advice http://blog.guykawasaki.com/2005/12/t..., you practiced your pitch, and now you're ready to rock and roll.

You're a little nervous but feeling good. You go in and start your presentation, and you're on slide two, and the VC asks "What's the business model here""
No problem, you're ready for him. "I'll get to it on slide 7, let's go through the product first."

Stop! I know it' s hard to change the flow, but expect to do it. Go ahead and jump to slide 7 and give him 10 seconds to read the slide and then explain the model. 10 seconds should be enough since you don't have that much text on a slide, or you shouldn't and even if you did, it wouldn't matter since most VCs have ADD and won't take more than 10 seconds to read anything. The one exception is anything related to finance. But to get back to my main point (VCs are not the only ones with ADD), focus on what the other side is interested in and answer the questions in the order that they are presented.
Usually, one question will lead to the next and you'll find that you're referring to the presentation as support material rather than guiding the discussion.
So why do you need the powerpoint deck" As I just mentioned, it's support material, but it also helps you make sure you've covered everything. When things slow down in the conversation or when your time is almost up, go back through the presentation, and double check that you haven't missed any critical information.
As part of the conversation you'll hear some criticism or doubt about your product, your direction or something else in the presentation. Your gut reaction is to argue, mine is. They're not getting it. Stop yourself. Instead ask question to help you clarify why their thinking is different than yours. There are several reasons to do this.
1. They don't know your company and probably the space it's in nearly as well as you do. On the other hand, they've been exposed to a lot more companies than you have. You're getting free advice. Listen to it and try to absorb. I've talked to three VCs in the last 4 weeks, and two of them gave me good insight which helps me fine tune my model.
2. If they have this objection other VCs might have it too. Listen, learnd and maybe next time you do a pitch you'll be better prepared to answer this issue, or tackle it in your presentation.
3. Arguing has the potential of making you look defensive and uncooperative. Will they really want to invest in someone with these traits.

Having said that, if they challenge one of the basic assumptions of your plan and you've considered and rejected their arguments, it's perfectly OK to present this. "Yes, we've heard from other people that they thought that the markets can't be any bigger than 250,00 users, but actually a Gartner report in Feb of 2008 shows that there are at least 5,000,000. The reason the market is understimated is that most of these people are in Asia and the web analytics don't count them."
Here you scored a point. You thought of the problem researched it, and can provide supporting data.

In summary, try to reach a good balance of give and take. Talk about your product, show that you're excited about it, but listen. I certainly try to.